SHANGHAI • China's ambitions for a Nasdaq-style board for start-ups have galvanised the country's tech companies which are hopeful that they can sidestep complex IPO (initial public offering) hurdles and access easier funding.
The surprise announcement for Shanghai's planned "technology innovation board" by China President Xi Jinping early last November paves the way for a lower listing threshold, potentially scrapping a requirement that aspiring companies must be profitable.
For Beijing, the move is seen helping to counter Washington's curbs on US technology companies and may draw the next generation of high-tech firms to list at home. Some of China's best known brands such as e-commerce firm Alibaba Group and gaming and social media giant Tencent Holdings have listed in New York and Hong Kong.
Last year, Chinese companies raised US$64.2 billion (S$87.2 billion) globally - almost a third of the worldwide total - via IPOs, but just US$19.7 billion of that came from listings in Shanghai or Shenzhen, according to data from Refinitiv, compared with US$35 billion in Hong Kong.
The intense interest in the new board, even before rules are finalised, underscores the significance to private Chinese companies of having an alternative source of funding.
"Our business is in the field of network information security and coding technology, and we're regulated by the (Communist) Party. So we cannot receive foreign capital or list overseas," said PeopleNet chairman Tan Jianfeng. "The new board is a very good (funding) opportunity for companies like us, and we have plans to list there."
According to the Hurun Report, China had 181 unicorns at the end of September, surpassing the United States as the country with the biggest number of start-ups worth at least US$1 billion.
Officials have been scrambling to draw up detailed rules, expected to be published this month, with the aim of launching by June, the 21st Century Business Herald reported.
The new tech board, to be set up by the Shanghai Stock Exchange, will include a registration system - in effect removing official control of the IPO process that has for years produced a stop-start pipeline of listing candidates with a waiting time measured in years not months.
The board is also expected to allow listings from companies yet to make a profit - a common practice in tech-heavy markets such as New York and, more recently, on Hong Kong's main board.
"For the venture capital industry, spring is coming. But I hope the spring is enduring, not a short-lived one," said Mr Andrew Qian, chairman and CEO of New Access Capital, a Shanghai-based investment and financial advisory firm.
Bankers said IPO candidates may still be carefully scrutinised to protect investors. "You need to pay attention to a company's core technologies... if a pig farmer wants to list on the tech board, you need to screen it out, unless it makes epoch-making breakthroughs in breeding technology," said TF Securities' investment banking director Liu Guangfu.